The Blue Economy: Calling the bluff and swimming with the sharks

Shares

BY HEZ GIKANG’A

As President Kenyatta winds up his month-long working tour at the coast, different views have emerged on this stay at the coast by a sitting Head of State.

But I submit that beyond the usual rose-tinted, pork-barrel politics we are used to, it is imperative to go beyond the hype from both sides of the political fault-lines and reflect on how important, economically, the six counties that line up the former coast province are to Kenya’s, and the region’s economy, and what should be the more important and bigger question of unleashing this potential for the benefit of the Kenyan people.

Nevertheless, I urge both sides of the political space to take cognizance of the fact that the foregoing depends on forging a cordial working relationship between our national government, it’s ministries, departments and agencies like the Kenya Ports Authority (KPA), Kenya Maritime Authority (KMA), LAPSSET Program, Kenya Navy, Kenya Revenue Authority (KRA), Kenya Tourism Board (KTB) on the one hand, and the Jumuia ya Kaunti za Pwani Economic Block (Kilifi, Kwale, Taita Taveta, Lamu, Mombasa and Tana River County governments), private-sector and citizens on the other hand.

This, and nothing more or less, is essential for the success of our putative integrated maritime policy.

If the 3 million plus Kenyans living outside the country and remitting back home an average of US$100 million monthly are the 48th County, then the 230,000 Km2 of territorial waters stretching 200 nautical miles into the international waters and the additional to the 10,000 Km2 of inland lakes and rivers are our Exclusive Economic Zone (EEZ). Collectively, they form our 49th County.

This EEZ is our Blue Economy, euphemistically named so from a design theory, co-initiated by Gunter Pauli, which is intended to bring natural ecosystems and economy into harmony and create jobs.

Its importance cannot be gainsaid. Apart from shipping, and artisanal fishing, this hitherto untapped maritime resource harbors enormous economic opportunitiesto transform Kenya’s fortunes from a lower middle-income country to an upper middle-income nation. It is therefore imperative to map out the potential, craft and execute integrated plans to sustainably contribute to Kenya’s equitable growth. This is already underway.

95 percent of Kenya’s international trade is facilitated through maritime transportation, as it is the most economical mode of transport especially for bulky goods, the world-over. The maritime economy is the driver of 92 percent of our international trade, cementing its centrality to our competitiveness and assuring the economic survival of our landlocked neighbours, Uganda, Rwanda, Burundi, South Sudan, and the eastern part of the Democratic republic of Congo.

Moreover, our coast line provides food, recreation and homes, thereby creating employment, and economic linkages to other sectors of our economy through maritime transport, tourism and fishing, key pillars of our socio-economic structure.

As it stands, we have previously barely exploited its enormous opportunities. Evidence? the gross under-investment in comparison to other sectors. It is with this in mind that the last half-decade has seen increased activity and visibility of this sector both at the pan-African and national level. Kenya has embraced the spirit and letter of key pan-African initiatives like the African Maritime Transport Charter,2010, the 2050 Africa’s Integrated Maritime Strategy; and Agenda 2063, all of which seek to refine and define an integrated maritime policy that encompasses all aspects of a sustainable, clustered and inclusive, blue economy.

The over arching vision of the2050 AIM Strategy is to “foster increased wealth creation from Africa’s oceans and seas by developing a sustainable thriving Blue Economy in a secure and environmentally sustainable manner”, while Agenda 2063 has action plans to ‘Connect Africa’ through world-class infrastructure, like through our own US$24 billion Lamu Port South Sudan Ethiopia (LAPSSET)Corridor Program, the Northern Corridor Integrated Projects (NCIP) that involve Kenya, Uganda, Tanzania and Rwanda with Ethiopia, South Sudan and Burundi as observers, and Mombasa port’s modernization.

Further, Agenda 2063 moots a concerted push to finance and implement major infrastructure projects’ that include, among others, strengthening the African Port and shipping sector as regional and continental assets and developing strategies to grow the African Blue Economy.

Both the 2050 AIM-Strategy and Agenda2063 take along view of Africa’s development aspirations. They set out a vision of transformative change: a future where Africa’s resources are optimized for the benefit of all Africans. Both documents have set out challenging and inspiring agendas. The implementation of the2050AIM-Strategy dovetails with Agenda2063,which has seven pillars.

These are lofty aspirations that need to be unpacked and cascaded to the local level from Lunga Lunga and Shimoni in the south coast to Kipini and Kiunga in the North to deal with the age-old sentiments of disenfranchisement at the coast.

So, why do we need to take a holistic view of the blue-economy? Doing so will deliver on the promise of a new beginning for people who for half a century feel, rightly or wrongly so, left out of the economy and governance. As it is, Kenya is making credible movements towards opening up opportunities in the sector through a raft of reform measures.

Building a world-class workforce capable of serving our needs and that of the global maritime industry is key to this. And we have got going on this. A number of colleges and universities including Jomo Kenyatta University, Pwani University and the Kenya Maritime Authority (KMA) are offering maritime- based courses to train manpower, as the global market suffers a chronic shortage of personnel averaging 30,000 experts. Manpower is king, as can be evidenced by the US$5 billion annual remittances sent back home by Filipino crew, who dominate the global industry.

The National Treasury, from FY 2014/15, gave tax rebates to local firms who purchase, build, or operate locally registered ship, as we are exporting over Sh200 billion servicing freight costs, insurance and other surcharges for ships docking in our port. This is much needed revenue that would change the economic status of the coast province and Kenya’s financial markets.There is debate too about opening up our local Ship register to allow ships to fly our flag, as our ship register is currently closed. Others have succeeded here. Landlocked Ethiopia, with 8 ships so far, is earning over US$40 million from its own ship-registered vessels annually, and has decreed that all of the government’s procured cargo be shipped in these vessels. Puny Zanzibar has 3 vessels so far. Kenya has none.

On fishing, we have a potential of 350,000 metric tonnes of marine products, worth an estimated Sh100 billion annually. We only managed 10,000 tons in 2014, earning us revenues of Sh 2.3 billion.

We can learn a lot too from our African peers – Monrovia, Liberia, which ranks number one of the number of ships in its register, and comes second to Panama on revenues earned; or Botswana and South Africa on port efficiencies to reduce demurrage charges and costs of imported goods. Which is why as numerous studies by actors like Trade Mark East Africa (TMEA), East Africa Trade Hub, the East African Community (EAC) and the East African Business Council (EABC) have shown, port inefficiencies are costing the region upwards of Sh250 billion annually, and why the move towards contracting a concessionaire for Mombasa’s new terminal are commendable, with the right partners and motivation.

We are one of the few African countries who are members of the International Maritime Organization (IMO), which has distinguished itself as the global standard-setting authority for the safety, security, and environmental performance of international shipping. Therefore, our Navy, and the proposed Maritime Police and Border Patrol units should leverage this to build our institutional and human capacity to deal with some of their major challenges like insecurity, piracy and terrorism.

We have taken steps towards exploiting other lucrative opportunities including establishing affordable, easily accessible infrastructure and energy for maritime economy economic clusters, notably the free-port, as envisaged in our port management plan in the establishment of the 3,000 acres Dongo Kundu Special Economic Zone in Mombasa that will leverage clustering to bring together synergies and efficiencies for a manufacturing park, ship chandling, bunkering, berthing, ship repair, ship building, maritime finance and insurance, amongst others.

An exciting opportunity for Kenya’s world-renowned tourism industry is the cruise tourism option that is clearly picking up. Kenya received at least 4 cruise-ships last year, and modernization of the Mombasa Cruise Ship Handling facility is almost complete.

At an average growth-rate of 7.4% annually, cruise tourism is the fastest growing niche in the tourism industry over past two decades, with global revenues expected to hit US$120 billion in 2016, especially so given the low global oil prices. The returns on Investment in cruise tourism are like no other, with over 85%ofCruisepassengersreportedly returning to destinations sampled to which they return, and 50% of the Cruisers fully expecting to return to the destinations they like for a land-based vacation.

Interestingly, the 24 million global cruisers are not exclusively Cruisers; they are frequent vacationers, taking 3 trips each year, with 25% of their total holidays being a Cruise. And the numbers look good too, as the best cruise Industry estimates state that approximately US$200,000 in wealth is generated for each cruise Ship call of a vessel of around 2,000 passengers, all things considered.

How does this work out for Kenya? Assuming 10 potential Cruise calls into East African ports, these could be 10 World cruise calls per annum and if one or two of the cruise Lines ‘’hub‘’ a vessel in the Indian Ocean for 5 months a year between November through to April then potential cruise calls per annum could be 40 calls per annum. Each vessel calling to Mombasa is on average likely to bring about US$400,000 – 500,000 of revenue into Kenya per call. These 40 cruise calls per year could result in $20 million revenue for Kenya, in addition to other destinations such as Mauritius and Tanzania, an amount that would hugely boost lives and local industry.

Port Miami, the global leader in cruise tourism, had close to 6 million tourists last year. Cruise tourism adds, at last count, US$27 billion (2014) to Florida’s economy, and sustains over 200,000 jobs directly. Indirect benefits are a factor of 2-3 times. As Mohammed Hersi, CEO Heritage Hotels asks, why is Singapore, a country with an area of 719 Km2 only, moving over 34 million tons of equivalent units (TEUs/containers), while East Africa, a region of 1.5 million Km2 and 150 million people, moving only 1 million TEUs annually? On cruise tourism alone, Singapore has over 1 million visitors, while we had none in 2014 and less than 5,000 in 2015……

With the creation of a Maritime Affairs Department under the Ministry of Transport and Infrastructure, and the nomination of Ms. Nancy Karigithu as the PS, a trail-blazer who has spent her entire working life on maritime issues, I have no doubt that with the requisite support, we will move to execution of our maritime integrated plan and unlock value for all of us.

This is the bigger picture that our leaders need to align their words, actions and vision to.

(Hez Gikang’a is the East Africa MD & Co-founder, KEAMSCO Ltd, a New York, Bremen and Nairobi-based Management Consulting & Business Advisory firm)

Shares
Hit enter to search or ESC to close